Reply #121: Fin

[ozymandius]

Dow 11,284.15 Down 42.17 (0.37%)
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4:20 pm : The stock market posted a steep decline on Monday as plunging crude oil and commodity prices caused a steep sell off in energy and material names, but did not translate into large gains in the broader market. Selling interest was also fueled by continued concerns regarding financials and a June personal income and spending report that showed higher-than-expected inflation.

Crude prices plunged 3.0% to $121.30 per barrel and commodities as a whole tumbled 3.4%. There was no specific news item to account for the retreat, although there was speculation that a large hedge fund had to liquidate its positions.

The energy sector (4.9%) fell on the retreat in crude prices. Likewise, material stocks slipped 4.2%, with Freeport-McMoRan (FCX 80.44, -10.87) getting hit especially hard.

Lately, the stock market as a whole has rallied when the price of crude oil declined. This session, however, only saw modest buying interest on the drop in crude. Surprisingly, even the transportation sector (-0.8%) was unable to muster a gain. As a result, weakness in the materials and energy sectors offset the benefit that the rest of the stock market saw due to the drop in crude and commodity prices.

Only three sectors posted a gain -- consumer discretionary (+0.5%), consumer staples (+1.2%) and health care (+1.3%). The health care sector got a boost after Humana (HUM 46.75, +2.11) posted better-than-expected second quarter earnings and gave a full-year earnings outlook that topped Wall Street's forecast.

The drop in crude prices helped the financial sector recover from its session low when it was down 2.9%, although the sector still underperformed with a loss of 1.3%.

Oppenheimer analyst Meredith Whitney -- who is widely followed after she correctly predicted last autumn that Citigroup (C 18.90, +0.04) would cut its dividend -- told Fortune magazine that the financial market turmoil is far from over. On CNBC, Whitney said that home prices will fall much more than people expect.

In addition, London-based bank HSBC (HBC 81.49, -1.51) saw first-half 2008 profits fall 29%, largely due to losses related to the U.S. mortgage market.

In terms of economic news, the June personal income and spending report was mixed, with investors showing disappointment regarding the report's inflation component. Month-over-month, personal income rose 0.1% (-0.2% consensus), personal spending increased 0.6% (+0.4% consensus) and core PCE, the Fed's preferred inflation measure, rose 0.3% (+0.2% consensus).

The PCE price index is up 0.8% month-over-month. As a result, real spending and income actually fell in June.

Separately, the latest factory orders report showed that the manufacturing sector is much healthier than is widely recognized. June total factory orders were up 1.7%, which is much stronger than the expected gain of 0.7%. Excluding transportation, orders rose 2.3%.

Tuesday brings the widely anticipated FOMC announcement. The fed funds rate is expected to remain unchanged at 2.00%, so the wording of the Fed's directive will be the main trading catalyst.DJ30 -42.17 NASDAQ -25.40 NQ100 -1.2% R2K -1.7% SP400 -1.9% SP500 -11.30 NASDAQ Adv/Vol/Dec 928/1.99 bln/1878 NYSE Adv/Vol/Dec 1049/1.23 bln/2065